Dhanin’s Charoen Pokphand Group Co. will buy the 15.6
percent stake in China’s second-largest insurer for about HK$59
($7.61) a share, giving the U.K. bank a $2.6 billion profit,
London-based HSBC said in a statement today. Ping An shares
jumped the most in almost three months in Hong Kong trading.

The sale marks the 37th divestment by HSBC Chief Executive
Officer Stuart Gulliver, who said the group remained committed
to China through its investment in Bank of Communications Co.
Dhanin’s Charoen, which claims to have been the first major
foreign investor in China after Deng Xiaoping opened the economy
in 1979, is gaining access to an insurance market that has
expanded an average 19 percent a year in the past decade.

“Slowly but surely, Stuart Gulliver is refocusing HSBC
back to its core strength of commercial banking,” Adam Chan, a
Hong Kong-based analyst at CCB International Securities Ltd.,
said today. The CEO is “making the tough choices necessary to
execute on the strategy he laid out 18 months ago.”

The per-share price represents a 1 percent discount on Ping
An’s close on Nov. 16, before news of the deal was first
reported. The stock has gained 19 percent this year after rising
5.6 percent today to HK$60.90 as of 3:19 p.m. HSBC climbed 1.4
percent to HK$79.80 in Hong Kong and was up 0.6 percent at 640
pence as of 8:04 a.m. in London trading.

Asset Sales

Other financial shares also climbed, pushing the Hang Seng
Finance index to a 2 percent increase, the biggest gain since
Sept. 14. China has abolished a regulation limiting insurers’
investments in commercial banks, the insurance regulator said in
a statement on its website yesterday.

Gulliver, 53, is seeking to cut costs by as much as $3.5
billion by 2013 and boost returns by selling assets to focus on
growing economies in which the bank has the greatest market
share. The lender is cutting 30,000 jobs and agreed in March to
sell some of its general insurance units in Asia and Latin
America for about $914 million.

The British lender valued its holding in Shenzhen-based
Ping An at $6.37 billion at the end of December, according to
its annual report. It has spent $1.6 billion since 2002 building
up the stake, in part by making purchases from Goldman Sachs
Group Inc. and the buyout unit of Morgan Stanley. HSBC’s holding
shrank to about 16 percent after Ping An’s $2.5 billion stock
offering in 2011.

‘Capital Pressures’

“The stake sale comes at a good time for HSBC,” Sandy Mehta, the Hong Kong-based chief executive officer of Value
Investment Principals Ltd., said today. “Any moves in which
banks are realizing and cashing in on investment gains and
augmenting their capital position is sound strategy, given
global uncertainties and ongoing regulatory and capital
pressures banks are facing.”

Charoen Pokphand will buy the shares through three indirect
wholly owned units, HSBC said. The transaction will take place
in two phases, with the first to be completed by Dec. 7. China
Development Bank Corp., a policy lender, will finance part of
the deal through its Hong Kong branch, according to the
statement.

“This transaction represents further progress in the
execution of the group’s strategy,” Gulliver said in the
statement. “China remains a key market for the group,” he
said, adding that HSBC will build its strategic partnership with
Bank of Communications.

Capital Boost

The latest transaction will bolster HSBC’s core Tier 1
capital ratio by about 50 basis points and its total capital
ratio by 100 basis points, according to the bank’s statement. A
basis point is 0.01 percentage point.

Ping An Chairman Peter Ma has overseen the expansion of the
company into the world’s third-largest insurer by market value
since he founded it in the southern Chinese city of Shenzhen 24
years ago. The group also has banking, securities and money
management operations.

China’s insurance market expanded an average 19 percent a
year in the past decade while insurers’ assets jumped 10-fold,
according to the China Insurance Regulatory Commission. Premium
income slid 1.3 percent in 2011 as regulators tightened rules on
selling coverage over bank counters and insurers adjusted their
product mix to improve profitability.

“This insurance business doesn’t fit into HSBC’s ’five
filters’ strategy,” said Dominic Chan, a Hong Kong-based
analyst at BNP Paribas SA. “For the longer term, HSBC is
probably thinking it would be very hard for them to get some
kind of control over China’s second-largest life insurer.”

Billionaire Dhanin

Dhanin’s net worth is estimated at $6.2 billion, according
to the Bloomberg Billionaires Index. Almost 60 percent of the
73-year-old’s fortune is from investments in overseas private
companies.

Calls to Dhanin’s office on a public holiday in Bangkok
weren’t answered. Suthana Hongthong, a Bangkok-based spokeswoman
for the company, said she couldn’t immediately comment on the
deal, when reached by mobile phone.

Seed Retailer

Charoen Pokphand was established in 1921 as an agricultural
seed retailer in Bangkok by Dhanin’s father, Chia Ek Chor, who
came from Shantou in China’s Guangdong province, and his uncle,
Chia Siew Whooy, according to the company.

Dhanin became a billionaire expanding his father’s chicken
feed business. Along the way, he added an Internet fortune even
though he didn’t know how to send e-mail or use a computer. He
got his start in telecommunications in 1990 when he won
Bangkok’s first private phone license and built a broadband
telecommunications network in Thailand.

The group has since expanded into a global business with
operations in agriculture, retailing, trading,
telecommunications, property development and petrochemicals,
employing more than 250,000 people, according to its website,
and has annual revenue of about $33 billion.

Along the way, Dhanin has had some missteps. Much of the
Chearavanont family’s fortune eroded after Thailand devalued its
currency in July 1997, triggering recession in much of Asia.
Dhanin’s $5 billion in wealth fell below $1 billion, according
to Forbes magazine.

Among the group’s mistakes was rapid expansion in areas of
limited expertise. By the mid 1990s, CP was involved in such
unrelated activities as motorcycle manufacturing, hotels,
brewing and gas stations, in both China and Thailand.

When the empire -- much of it built on foreign loans --
began to falter, Dhanin negotiated to freeze debt payments,
halted dozens of ventures and sold off assets.